The July 2021 edition provides us with the latest pre-pandemic details on the buy-and-bill market in Medicare Part B.
As you will see below, the Part B spending data look like Groundhog Day all over again. Medicare payments continued to their shift from physician practices to hospital outpatient departments.
This spending change would have been even more pronounced if CMS had not reduced reimbursements to 340B hospitals.
Early data suggests that the COVID-19 pandemic has accelerated hospital’s acquisitions of physician practices, suggesting that we’ll keep talking about the shift in sites-of-care—even if you are sick of these dolphins.
FOUND IN TRANSLATION
In the buy-and-bill process, a healthcare provider purchases, stores, and then administers the product to a patient. After the patient receives the drug and any other medical care, the provider submits a claim for reimbursement to a third-party payer. The process is called buy-and-bill because the medical claim is submitted (billed) after the provider purchases (buys) and administers the drug.
The MedPAC report provides spending data for Part B-covered buy-and-bill drugs furnished by hospital outpatient departments (HOPD), physician practices, and other suppliers. The “other suppliers” category in the charts below comprises retail pharmacies that supply classes of oral drugs covered under Part B, DME suppliers of inhalation drugs, and home infusion pharmacies that supply home infusion drugs.
Medicare spending includes program payments and beneficiary cost sharing. Data reflect all Part B drugs regardless of payment formula. Unlike commercial payers, Medicare does not generally permit large variations among different sites of care for drug reimbursement. Therefore, the dollar figures below approximate utilization patterns.
For a deep dive into the current and future economics of the buy-and-bill market, see chapters 3 and 6 of our Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.
AU REVOIR, GOPHER!
The chart below tracks the shift of Part B spending from physician practices to hospital outpatient departments. Spending at hospitals has grown by $11.9 billion (+384%), from $3.1 billion in 2008 to $15.0 billion in 2019. Meanwhile, spending at physician offices has grown by $12.2 billion (+124%), from $9.8 billion in 2008 to an estimated $22 billion in 2019.
Note that these figures understate the magnitude of the shift from physician offices to hospitals. For separately payable drugs acquired under the 340B Drug Pricing program, CMS has reduced hospital outpatient prospective payment system (OPPS) reimbursements under Part B from ASP plus 6% to ASP minus 22.5%. (This change didn't affect drugs on pass-through payment status, such as biosimilars.) If these payment reductions had not occurred, payments to hospitals would have been $15 billion in 2018 and $17.2 billion in 2019.
Our second chart, below, presents these data as a share of Part B spending. For 2019, physician offices accounted for an estimated 56% of Part B spending. Hospital outpatients’ share of Part B spending has almost doubled, from 21% in 2008 to 38% in 2019. If the 340B-related cuts had not occurred, then hospitals’ share would have been 42% of Part B payments in 2019—and the physician office share would have been 53%. Note that spending at physician offices has still grown significantly over the past 10 years, despite the loss of relative position. At least they have that going for them, which is nice.
Other sources document that commercial payers have also experienced the shift from physician practices. The commercial figures are harder to interpret, because hospitals are paid so much more than other sites of care.
CINDERELLA STORY
The shift in sites of care has occurred primarily because hospital and health systems have been acquiring physician practices. The Community Oncology Alliance (COA) has reported that from 2010 to 2020, nearly 700 oncology practices were acquired by hospitals, while an additional 400 practices had closed. About 140 practices have merged with another oncology practice. (We discussed these data in our April 2020 news roundup.)
Factors behind this acquisition spree include: We delve further into vertical integration by hospitals in Section 6.3.1. of our wholesaler economic report .
The full effects of the COVID-19 pandemic on prover markets on have not yet been reported, but the pandemic appears to have accelerated practice acquisitions. The total number of physician practices (of all specialties) owned by hospitals grew by more than 3,200 (+5%) from January 2019 to January 2021. (source) As I noted in the Drug Channels May news roundup, nearly 40% of U.S. physicians in 2020 were directly employed by hospitals or have practices owned by hospitals.
MedPAC’s pre-pandemic data suggest that these forces of change could hasten changes to the buy-and-bill market that I outlined in Specialty Pharmacy Keeps Disrupting Buy-and-Bill—and COVID-19 Will Accelerate It, including:
In the meantime, look for the shift to hospital outpatient administration to accelerate as the pandemic (hopefully) recedes and hospitals ramp up practice acquisitions over the next few years..
That's the fact, Jack.
Early data suggests that the COVID-19 pandemic has accelerated hospital’s acquisitions of physician practices, suggesting that we’ll keep talking about the shift in sites-of-care—even if you are sick of these dolphins.
FOUND IN TRANSLATION
In the buy-and-bill process, a healthcare provider purchases, stores, and then administers the product to a patient. After the patient receives the drug and any other medical care, the provider submits a claim for reimbursement to a third-party payer. The process is called buy-and-bill because the medical claim is submitted (billed) after the provider purchases (buys) and administers the drug.
The MedPAC report provides spending data for Part B-covered buy-and-bill drugs furnished by hospital outpatient departments (HOPD), physician practices, and other suppliers. The “other suppliers” category in the charts below comprises retail pharmacies that supply classes of oral drugs covered under Part B, DME suppliers of inhalation drugs, and home infusion pharmacies that supply home infusion drugs.
Medicare spending includes program payments and beneficiary cost sharing. Data reflect all Part B drugs regardless of payment formula. Unlike commercial payers, Medicare does not generally permit large variations among different sites of care for drug reimbursement. Therefore, the dollar figures below approximate utilization patterns.
For a deep dive into the current and future economics of the buy-and-bill market, see chapters 3 and 6 of our Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.
AU REVOIR, GOPHER!
The chart below tracks the shift of Part B spending from physician practices to hospital outpatient departments. Spending at hospitals has grown by $11.9 billion (+384%), from $3.1 billion in 2008 to $15.0 billion in 2019. Meanwhile, spending at physician offices has grown by $12.2 billion (+124%), from $9.8 billion in 2008 to an estimated $22 billion in 2019.
[Click to Enlarge]
Note that these figures understate the magnitude of the shift from physician offices to hospitals. For separately payable drugs acquired under the 340B Drug Pricing program, CMS has reduced hospital outpatient prospective payment system (OPPS) reimbursements under Part B from ASP plus 6% to ASP minus 22.5%. (This change didn't affect drugs on pass-through payment status, such as biosimilars.) If these payment reductions had not occurred, payments to hospitals would have been $15 billion in 2018 and $17.2 billion in 2019.
Our second chart, below, presents these data as a share of Part B spending. For 2019, physician offices accounted for an estimated 56% of Part B spending. Hospital outpatients’ share of Part B spending has almost doubled, from 21% in 2008 to 38% in 2019. If the 340B-related cuts had not occurred, then hospitals’ share would have been 42% of Part B payments in 2019—and the physician office share would have been 53%. Note that spending at physician offices has still grown significantly over the past 10 years, despite the loss of relative position. At least they have that going for them, which is nice.
[Click to Enlarge]
Other sources document that commercial payers have also experienced the shift from physician practices. The commercial figures are harder to interpret, because hospitals are paid so much more than other sites of care.
CINDERELLA STORY
The shift in sites of care has occurred primarily because hospital and health systems have been acquiring physician practices. The Community Oncology Alliance (COA) has reported that from 2010 to 2020, nearly 700 oncology practices were acquired by hospitals, while an additional 400 practices had closed. About 140 practices have merged with another oncology practice. (We discussed these data in our April 2020 news roundup.)
Factors behind this acquisition spree include: We delve further into vertical integration by hospitals in Section 6.3.1. of our wholesaler economic report .
The full effects of the COVID-19 pandemic on prover markets on have not yet been reported, but the pandemic appears to have accelerated practice acquisitions. The total number of physician practices (of all specialties) owned by hospitals grew by more than 3,200 (+5%) from January 2019 to January 2021. (source) As I noted in the Drug Channels May news roundup, nearly 40% of U.S. physicians in 2020 were directly employed by hospitals or have practices owned by hospitals.
MedPAC’s pre-pandemic data suggest that these forces of change could hasten changes to the buy-and-bill market that I outlined in Specialty Pharmacy Keeps Disrupting Buy-and-Bill—and COVID-19 Will Accelerate It, including:
- Expanding role of white-bagging by specialty pharmacies
- Growth of home infusion
- Shift to patient-administered formulations
In the meantime, look for the shift to hospital outpatient administration to accelerate as the pandemic (hopefully) recedes and hospitals ramp up practice acquisitions over the next few years..
That's the fact, Jack.
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